BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 211 (Price) - Tax Administration: Disclosure of Information:  
          Franchise Tax Board and Cities
          
          Amended: May 8, 2013            Policy Vote: G&F 7-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 20, 2013      Consultant: Robert Ingenito
          
          This bill does not meet the criteria for referral to the  
          Suspense File.


          Bill Summary: SB 211 would extend the authorization until  
          January 1, 2019, and extend the repeal date on the reciprocal  
          sharing of tax information between the Franchise Tax Board (FTB)  
          and a city's tax officials. 

          Fiscal Impact: FTB indicates that this measure would result in  
          revenue gains of $1.5 million in 2014-15 and $4.9 million in  
          2015-16. FTB's indicates that it currently has reciprocal  
          agreements with 102 cities, and that its administrative costs to  
          administer the program are about $718,000 annually. 

          Background: Tax information sharing between the State and local  
          agencies has existed for roughly 30 years, when FTB first  
          sponsored legislation mandating cities to annually report  
          information obtained from businesses they licensed.  FTB used  
          the information to identify new businesses that were obtaining  
          local business licenses and paying business license taxes, but  
          may not have been filing state income tax returns.  While the  
          program generated revenue, the Legislature repealed the program  
          in 1999 because the cost of state reimbursed mandate claims from  
          local agencies grew too much, making the program no longer worth  
          its cost.

          In 2001, the Legislature reenacted the program, but it instead  
          allowed city tax officials to obtain state income tax  
          information subject to a written agreement between FTB and the  
          taxing authority of a city (AB 63, Cedillo, 2001); FTB charged  
          the cities for its costs for collecting and sending the  
          information.  The Legislature extended the program in 2006 until  
          2011 (SB 1374, Cedillo).  In 2008, the Legislature extended the  
          program until 2014, but allowed cities to offset costs paid by  








          SB 211 (Price)
          Page 1


          providing its business license tax information to FTB to assist  
          Personal Income and Corporation Tax collection (SB 1146,  
          Cedillo).  Under the program, FTB may grant information limited  
          to a taxpayers' name, address, social security or taxpayer  
          identification number, and business activity code.  Only city  
          employees may use the tax information provided to the city, and  
          may only use it for tax collection purposes.

          Proposed Law: This bill would remove the sunset on the  
          state-local tax information sharing program, and would allow  
          agents of the city to receive information.

          Staff Comments: Municipalities often use consultants to collect  
          taxes on contingency, most notably Muni Services, LLC and HdL  
          companies.  However, current law prohibits cities from sharing  
          information obtained from FTB with these agents due to privacy  
          concerns; consultants work on contingency and have little  
          incentive to safeguard information.  SB 211 would expressly  
          allow these agents to receive this information.